When will the $10,200 of unemployment tax exemption go into effect?

[fanfare]

The whole point is to get unemployment  correction AND the extra credits.

Click on "amend my return" first.

[SoccerRefMon]

Thanks for the information, @Critter-3 . It's very informative.

I'm using TurboTax Deluxe, the CD/download version. It looks like updates to handle the unemployment credit have been incorporated in the many updates that have come through since March.

On review of the return that we filed in March and the Form 1040X generated a couple days ago, the $10,200 credit was appropriately applied. I was able to easily e-file our - ours and our son's - returns. We both have refunds coming. I did notice that one cannot have a refund from an amended return direct-deposited into one's account. Oh well. We'll wait to receive the checks.

As for the state return: It shows that there's a $0 balance on both returns. Comparing the returns from March and those generated in the amended process, the AGIs changed. Since our state - Kentucky - does not give the $10,200 credit, we don't receive a state refund; however, we do not owe the state any more money. We will file the returns with the state so they have our current data on file.

[fbmcardl2]

@Critter-3 @fanfare Just to close the loop, I spoke to two different tax specialists at TT today both of whom agreed it is okay to file the 1040-X even though it shows a larger refund than is due (because IRS automatically corrected the unemployment exclusion). They said that IRS will recognize that they already refunded the UCE and just refund the new savers credit added to the return. As comfort, there's this IRS information on amending returns:

Q3. I already filed an amended return (Form 1040-X) to claim the unemployment compensation exclusion, will this cause any issues or delay my refund? (added April 29, 2021)

A3. No. The IRS can identify a duplicate claim or mixed adjustment scenarios. If the Form 1040-X has changes other than unemployment compensation exclusion, only the part of the claim that was not adjusted when we applied the exclusion will be considered after we apply the exclusion. Filing a Form 1040-X won't increase the time it takes the IRS to make the automatic correction or reduce the time it takes to process your automatic correction.

https://www.irs.gov/newsroom/2020-unemployment-compensation-exclusion-faqs-topic-d-amended-return-fo...

[Critter-3]

Good to know they finally posted something on this odd situation this year  but  I fear everything will not go as smoothly as they hope.  

[rocco851]

I have $600 coming from this exemption. TurboTax advised me the IRS would direct deposit the money in May. It is now going on September and I have not received the money. Can you please look into this for me, I do need the money.

[xmasbaby0]

@rocco851 I think you misunderstood part of that.   The IRS began to send out those unemployment refunds in May, but they are sending them out in batches until all of them have been sent.

The IRS began to send out the additional refund checks for tax withheld from unemployment in May.  The refunds are being sent out in batches—starting with the simplest returns first.   If you are eligible for the extra refund for federal tax that was withheld from your unemployment the IRS will be sending you an additional refund sometime during the next several months.  TurboTax cannot track or predict when it will be sent.  The IRS has not provided a way for you to track it, so all you can do is wait for the refund to arrive.

https://ttlc.intuit.com/community/tax-topics/help/how-do-i-get-the-new-unemployment-benefits-if-i-ve...

Please read this very recent news from the IRS:

https://www.irs.gov/newsroom/irs-to-recalculate-taxes-on-unemployment-benefits-refunds-to-start-in-m...

https://www.irs.gov/newsroom/irs-begins-correcting-tax-returns-for-unemployment-compensation-income-...

https://ttlc.intuit.com/community/tax-credits-and-deductions/help/am-i-eligible-for-a-new-credit-or-...

https://www.irs.gov/newsroom/2020-unemployment-compensation-exclusion-faqs

[andreamcn]

I filed late in August showing the full $18,378 in unemployment per 1099-G. I've always updated the software to make sure any new legislation changes are up to date. On the community property unemployment payments smart Worksheet within TurboTax, being Texas, it appears the software divided this $18k between each of us and being below the $10,200 each gave credit and I didn't pay tax on that amount. My question is....Should I amend the return now to show the full $18k was just one of us and pay the additional tax my accountant believes is due on the amount above the $10,200? 

[Critter-3]

@andreamcn 

The program is doing it correctly for a community property state since the income is split between the 2 spouses and EACH spouse is entitled to the max exclusion ... tell your accountant to read up on the community property rules. 

[fbmcardl2]

@andreamcn If you need more "authority" to show your accountant, this may help.

"IRC §85(c) allows a taxpayer to exclude up to $10,200 of unemployment compensation income “re-
ceived” if the taxpayer’s adjusted gross income, computed without the unemployment compensation,
is less than $150,000.

In a community property state, IRS Chief Counsel has now confirmed that, for purposes of this section,
each spouse is considered to have “received” one-half of the unemployment compensation income received
by the other spouse, and therefore, each spouse may claim the exclusion if the other requirements are met."

Source: "Community Property’s Effect on the New Unemployment Compensation Exclusion – Take 2"
By David M. Fogel, EA, CPA

[andreamcn]

Thank you so much!

[xmasbaby0]

@shelliejean53 Do not amend for that.

 The IRS is recalculating refunds for people whose AGI is $150K or below and who filed before the tax law that changed the amount of unemployment that is taxable on a federal return became effective.   

The IRS began to send out the additional refund checks for tax withheld from unemployment in May.  The refunds are being sent out in batches—starting with the simplest returns first.   If you are eligible for the extra refund for federal tax that was withheld from your unemployment the IRS will be sending you an additional refund sometime during the next several months.  TurboTax cannot track or predict when it will be sent.  The IRS has not provided a way for you to track it, so all you can do is wait for the refund to arrive.

https://ttlc.intuit.com/community/tax-topics/help/how-do-i-get-the-new-unemployment-benefits-if-i-ve...

Please read this very recent news from the IRS:

https://www.irs.gov/newsroom/irs-to-recalculate-taxes-on-unemployment-benefits-refunds-to-start-in-m...

https://www.irs.gov/newsroom/irs-begins-correcting-tax-returns-for-unemployment-compensation-income-...

https://ttlc.intuit.com/community/tax-credits-and-deductions/help/am-i-eligible-for-a-new-credit-or-...

[Momduke20]

I was on unemployment year 2020 and I'm single no dependent.  I haven't received any money I paid taxes on

[xmasbaby0]

@Momduke20 Did you read the reply that is directly above your own question?

[sinatraa]

I retired January 1st 2021,and started collection unemployment about 2 weeks later do i have to claim this as income on my 2021 in come taxes...

[DoninGA]

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@sinatraa wrote:

I retired January 1st 2021,and started collection unemployment about 2 weeks later do i have to claim this as income on my 2021 in come taxes...

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Unemployment compensation is taxable income so you will have to report that income on your 2021 tax return.